Finance Ministry Reinforces Oct. 15 Deadline For PSUs To Clear Vendor, Contractor Dues
The government on Saturday set Oct.15 as the deadline for central public sector units to clear overdue payments to vendors and exhorted them to front-load capital expenditure as it looks to lift economic growth from six-year low.
Finance Minister Nirmala Sitharaman, who reviewed capital spending programmes with heads of 32 maharatna and navratna Central Public Sector Enterprises, said state-owned companies have been asked to front-load investment for the second half of the current fiscal.
CPSEs have been asked to submit a roadmap for the next four quarters by Oct. 15, she said after the meeting.
This meeting was held as part of the series of consultations the finance minister has been holding with various stakeholders to brainstorm on measures needed to accelerate economic growth, which dipped to a six-year low of 5 percent in the first quarter of 2019-20.
"It was decided that all pending dues to be cleared by Oct. 15 and by Oct. 15 they will have a portal through which all dealers and contractors shall start monitoring their payment," Sitharaman said.
“Meeting (will be held) with the RBI and the finance secretary and selected number of CPSEs to talk about why bank guarantees are becoming a big hitch or hurdle in government paying up the 75 percent post arbitration awards. If that is the case, I want RBI’s help also,” she said.
Also, CPSEs have been asked to detail the lifespan of arbitrations that lock payments after disputes with vendors and contractors, she said.
The finance minister stressed that capital expenditure needs to be given a vigorous push in the next two quarters.
CPSEs must ensure that regular payments are cleared expeditiously as it spurs investment cycle and establish the e-billing portal for enabling stakeholders to track the status of payments, she said, adding special efforts must be made to clear dues of MSMEs and resolve cases on the SAMADHAN portal of the Department of MSME.
Finance Secretary Rajiv Kumar said 34 central PSUs have already spent Rs 48,077 crore till August and have detailed spending of another Rs 50,159 crore till December 2019. An additional Rs 54,700 crore would be spent in the January-March quarter.
The expenditure plan is on track and companies have expressed their willingness to meet the target set for the current fiscal, he said.
Expenditure Secretary Girish Chandra Murmu said capex of all the 244-odd PSUs will be about Rs 4 lakh crore for the current fiscal, which could also go up depending on the requirement.
Some agencies have come to the government for enhancing gross budgetary support to them and the call in this regard will be taken during the revised estimate meeting, he said.
With regard to pending payments, Murmu said about Rs 55,000 crore has been cleared out of Rs 60,000 crore as on date.
All out efforts are being made so that the investment is on track and there is no liquidity crunch, he added.
Public procurement as a percentage of GDP in the country is estimated between 20 to 22 percent. With the Indian economy at $2.7 trillion, this amounts to public procurement to the tune of $500 billion annually. CPSEs are a major contributor to public procurement of goods and services.
The government has introduced performance-based evaluation and has also empowered the boards of maharatna and navratna companies for taking operational decisions.
In a statement, the finance ministry said CPSEs should double their contribution to the gross domestic product and be the third major source of revenue for the Centre after direct and indirect taxes. They must also make efforts to reduce the country's imports bill and expand India's global strategic reach by 2022, it added.
To improve transparency, a major transformation has taken place in the last few years in the way procurement is made in the government by setting up of the Government e-Marketplace and the Central Public Procurement Portal.
This allows procurement to take place in a completely paperless, cashless and system driven e-market with minimal human interface.
The participating CPSEs presented their capex till August 2019 to the finance minister and explained their plans for the next two quarters.
For example, ONGC has a capex plan of Rs 32,921 crore for 2019-20. Its capex till August 2019 was Rs 8,777 crore, which was 26.66 per cent of the total planned capex for the fiscal.
Will Review Capital Expenditure Made By CPSUs Every Month, Says Expenditure Secretary
The government will review capital expenditure made by central government-run units every month, Expenditure Secretary GC Murmu said.
Capex Target Till December 2019 Is At Rs 50,159 Crore
The government has set a capex target of Rs 50,159 crore till December, Finance Secretary Rajiv Kumar said, adding that the capex target stood at Rs 54,700 crore as of June.
FM Asks Government Departments To Share Capex Plans For Next One Year
The union finance ministry has asked government departments to share their capital expenditure plans for the next four quarters, Finance Minister Nirmala Sitharaman said on Friday.
These departments have been asked to share their capex plans and how much money is expected to be spent on the ground, Sitharaman said, adding that this will help the government in ensuring that its expenditure plan is on track.
Finance ministry has been pushing state-run entities to clear all dues owed to vendors, in a bid to kickstart the economy.
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Series of Announcements
Expenditure Secretary, GC Murmu has been tasked with reviewing and fast tracking payment due from all central government public sector units and ministries. Finance Minister Nirmala Sitharaman had made the announcement on August 23.
The Finance Minister had announced the government’s plan to remove the tax surcharge on foreign portfolio investors, pay upfront Rs 70,000 crore for bank recapitalisation, and several other measures to revive the automotive industry, also on the same day.
Again on Aug. 30, she outlined plans to merge 10 public sector banks into four in an effort to better manage capital. She also announced a series of measures for state-run banks hoping that the capital infused by the government would result in stronger banks.
Later, she announced measures to provide relief to the housing sector and boost exports. One such proposal was to set up a special fund to provide last-mile funding to affordable and middle-income housing projects that are stalled due to a liquidity crunch.
Still, the biggest surprise was reducing the effective corporate tax rate for companies.
Sitharaman also directed state-run banks that no stressed MSME be declared as an NPA at least till March 31, 2020. She has convinced PSU and private banks to join a public outreach programme, in the form of a loan melas in 400 districts, where those in need of credit can come and avail it.